The Independent View: Shareholders Should Get Say On Co’s Political Spending

Since the Supreme Court ruling in 2010, Citizen United v. FEC, that corporations have a “right” to spend unlimited money influencing elections, I have asked why the shareholder's did not have say in the spending. That could change in the future.

People who own stock in Home Depot will vote on whether they can have a say over the company’s political spending, the Securities and Exchange Commission has decided. The SEC sent a no-action letter to Home Depot in response to that company’s attempt to keep a shareholder resolution on corporate spending off a proxy statement. Likely other companies will keep this in mind when putting their proxy ballots together. In doing so, the SEC recognized that shareholder accountability over corporate political spending is a significant policy issue that can’t be barred from a proxy statement under the ordinary business exclusion.

The substance of the Home Depot proposal, submitted by NorthStar Asset Management Funded Pension Plan, is the following:

Shareholders recommend that the Board of Directors adopt a policy under which the proxy statement for each annual meeting will contain a proposal describing:

The company's policies on electioneering contributions, any specific expenditures for electioneering communications known to be anticipated during the forthcoming fiscal year, the total amount of such anticipated expenditures, a list of electioneering expenditures made in the prior fiscal year, and providing an advisory shareholder vote on those policies and future plans. NorthStar’s supporting statement requested that management provide an analysis as to whether Home Depot’s political spending was in line with its values and policies, and any risks it might pose to the company’s reputation, brand, or shareholder value.

This shareholder proposal was based in part on draft legislation written by the Brennan Center last year which became the Shareholder Protection Act in the 111th Congress. The SEC rejected all of Home Depot’s objections to the inclusion of this shareholder proposal on the 2011 proxy statement.

This SEC no-action letter means shareholders can assert self-help on a company-by-company basis, not just on transparency of political spending, but also on an advisory shareholder vote on such spending.

This is a big step in the right direction for giving shareholders more protections after Citizens United allowed corporations the ability to spend other people’s money in politics.